TDS (Tax Deducted at Source) is a simple concept — deduct tax when making certain payments and deposit it with the government. In practice, though, TDS errors are one of the top reasons businesses receive income tax notices.
Mistake 1: Missing TDS Deduction Altogether
Not everyone knows that rent above ₹50,000/month, professional fees above ₹30,000 in a year, or contractor payments above ₹30,000 per transaction attract TDS. Missing the deduction means you, as the payer, become liable to pay the tax plus interest and penalty.
Mistake 2: Wrong TDS Rate
Different sections prescribe different rates — 10% for professional fees (194J), 1-2% for contractors (194C), 10% for interest on deposits (194A), and so on. Using the wrong rate triggers demand notices under Section 201(1).
Mistake 3: Missing PAN Leads to 20% TDS
If your vendor or employee doesn't provide a valid PAN, TDS must be deducted at the higher of (i) the prescribed rate or (ii) 20%. Always collect PAN before making the first payment.
Mistake 4: Late Deposit of TDS
TDS deducted in a month must be deposited by the 7th of the following month (30th April for March). Late deposit attracts 1.5% per month interest — it adds up quickly.
Mistake 5: Not Filing TDS Returns Quarterly
Quarterly TDS returns (Form 24Q for salary, 26Q for non-salary, 27Q for NRI payments) are mandatory even if no TDS was deducted — file a NIL return. Missing the return attracts a late fee of ₹200/day under Section 234E.
Stay Compliant
Our TDS management service handles monthly deductions, deposits, quarterly filings, and Form 16/16A generation — all within deadlines. Focus on your business, we'll handle compliance.